MOODY'S: Australia's AAA rating is safe because growth is strong

Australia’s growth in 2015 was so surprisingly strong that credit rating agency Moody’s said it is a “credit positive”.

That’s even though Australia already has the highest possible rating for a sovereign nation of AAA.

Moody’s team of analysts, led by senior vice president Marie Diron, highlighted that the 3% rate of growth in the December quarter was the “strongest pace of growth since the first quarter of 2014”. That meant the 2.5% growth rate 2015 was “faster than our forecast”.

Diron and her team made a strong point that the economic performance will assuage any fears offshore investors might have around Australia’s ability to fund its growing debt.

“A robust economy will also shore up international investors’ confidence in Australian assets, which is important given reliance on external funding for domestic investment.”

That is important in its own right.

But in a world of fast and free capital flows, Australia’s growth rate, and what that says about economic resilience, is doubly important. Moody’s pointed out that in this context, Australia stands at the very top of the AAA rated pack.

“Australia’s economic performance is strong in a global context. In 2015, GDP growth outperformed commodity-producing peers including Canada (Aaa stable), which grew 1.2%, and Norway (Aaa stable), which expanded 1.6%. It was also in line with rates in similarly sized commodity-importing economies such as Korea (Aa2 stable), which advanced 2.6%,” Moody’s said.